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Graduated and on your own, now what?
BY NATHANIEL SILLIN
Fall is here and school is back in session but for many graduates, it’s out for good. If you’re a recent high school or college graduate, this might be the first time you’re on your own. Living away from home and paying for your own housing, food and other necessities can be a tough adjustment. But being on your own for the first time is a new and exciting experience and it offers a perfect opportunity to set yourself up for success.
Make sure you have the right bank account for you. A lot may have changed since you opened your account, so consider changing your account to find the best one for your needs. If you are still sharing a bank account with your parents, consider opening your own. Opening an account can be simple and it’s possible to do so online or over the phone – but you’ll need a minimum deposit amount and documentation like your Social Security Number. For helpful tips, see the Consumer Financial Protection Bureau’s (CFPB) guide on opening a checking account.
Live within your means. As you begin your career it’s essential to have reliable income and use it responsibly. A good budgeting guideline to start with is the 50/20/30 rule. Allot 50 percent of your income to necessary costs like housing, 20 percent to financial goals like repaying student loans and 30 percent to spending money. Remember that this is a rule of thumb and you can adjust it to fit your needs. Never spend more than you have, and always pay your bills on time.
Get ready for retirement – yes, really. The younger you start saving, the more valuable your savings are. According to this Bankrate example, starting your savings at age 25 at $2,000 a year will yield a retirement account of $560,000 (assuming your earnings grow at 8 percent every year). But starting10 years later at age 35 will yield just $245,000 at retirement – less than half the money you’d have if you started saving ten years earlier. The earlier you start saving, the more money you’ll end up with – and if you take advantage of an employer-matched 401(k) fund, you can put away extra money for free.
Charge up your credit score. Building up credit as a young adult is important for big purchases down the road. Buying a house or purchasing a car are often significantly harder without a good credit score. It’s smart to start building good credit while your expenses are relatively small. For more information, the CFPB has a database of frequently asked questions with everything you need to know about credit cards and credit scores.
Bottom line: Though the transition from student to independent adult may feel overwhelming, you can take this opportunity to get your finances organized and prepare for working life. Building a strong financial foundation early on will help you worry less about your money and allow you to fully enjoy other new aspects of your life after college.